A rather tepid quarterly earnings report published by PDD Holdings (PDD -1.48%) led to a modest sell-off in its U.S.-listed equity on Monday.
The company, perhaps best known for its international e-commerce site Temu, didn't have a bad second quarter, but its results weren't spectacular, either. Its American Depositary Shares (ADSs) sank by 1.5% during that trading session as a result.
Revenue up, adjusted profitability down
PDD reported quarterly revenue of 112.4 billion yuan ($16.7 billion), representing 8% year-over-year growth. That was the encouraging news; on the discouraging front, net income not under generally accepted accounting principles (non-GAAP, or adjusted) declined by 13% to 28.5 billion yuan ($4.2 billion). This translates to 19.33 yuan ($2.88) per ADS.
Image source: Getty Images.
Both headline figures landed roughly in line with consensus analyst estimates. PDD-following analysts were modeling 113.9 billion yuan ($16.9 billion) on the top line, and adjusted net income of 18.35 yuan ($2.73) per ADS.
In its earnings release, PDD quoted CEO Lei Chen as saying that "Since the start of the year, global trade and regulatory landscapes have continued to evolve, creating significant challenges while also presenting new opportunities."
The company ramped up investments in its ecosystem during the quarter and promised to continue doing so. This was a key factor in the bottom-line slide.
NASDAQ: PDD
Key Data Points
Trouble with tariffs
China-based e-commerce companies like PDD are subject to the trade and regulatory factors Chen mentioned. While some have worked in its favor, it remains susceptible to these, particularly under an American presidential administration fond of using tariffs as a tool of foreign and economic policy.
Given that, I feel that the international business of PDD and its peers in the large Asian country is always at risk, and in ways that can be hard to predict. I wouldn't be a buyer of its ADSs these days.
